Indian mining industry urges easing of export taxes on iron-ore, bauxite

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The Indian mining industry has urged the government to reduce high export taxes on iron ore and bauxite, which are stifling the growth of the industry.

Sunil Duggal, president of the Federation of Indian Mineral Industries, said that around 137 million tons of iron ore fines of 62% grade were lying unutilised at the mines of eastern Indian states of Jharkhand and Odisha because the domestic steel industry was unable to buy it. The total iron-ore stocks in the country are estimated at 163 million tons currently.

“However, there is an export duty of 30% on +58% iron ore,” Duggal said, referring to the high duty that is impeding its shipment.

Speaking at the annual general meeting of FIMI, Duggal said that the piled up stock was also obstructing scientific mining.

“Abolition of export duty up to 63% iron will help in liquidating the huge non-moving stockpiles of iron-ore lying at the mine heads leading to enhanced valuable foreign exchange earnings.”

India had recently seen a bounce in shipments of the raw material, following the reopening of Chin world’s largest consumer China’s economy.

Most of the shipments were of low grade ore piled up in the country’s eastern region. A decade ago India used to be the third largest exporter of iron ore, but court imposed restrictions on mining as well as high taxes have choked shipments.

Duggal said that a similar value-added tax of 15% on bauxite was impeding the export of non-metallurgical grade of the mineral. which had brought a number of small mines on the verge of closure in the western states of Gujarat and Maharashtra.

The industry urged the government to remove the export tax as the mineral was unsuitable for use by domestic companies.

High taxes

Despite a reduction in corporate tax, the Indian mining industry remains one of the most highly taxed worldwide, with an effective tax rate of 58% on existing mines and 54% on those which had been auctioned, according to FIMI. India is unable to utilise its resources well due to lack of a conducive regulatory environment, despite enormous potential as its terrain is similar to Australia, says the mining industry.

It added that there are anomalies in a Goods and Services Tax levied on miners, wherein the tax structure is inverted due to higher levies for supplies and services rather than on the mineral.

Out of the total known geological potential area of about 0.571 million square kilometres, only 10% area is explored and out of this, and only 1.5% area of OGP is under mining.

Owing to inadequate exploration and consequent  under-harnessing of mineral resources, India is heavily dependent on imports of vital minerals like gold, base metals, platinum group of minerals, diamond, says FIMI.

India imported minerals and metals worth about Rs. 9.11 lakh crores during the year 2018-19, which was  almost four times the value of its domestic production.  The mining sector has also made little headway in exploration and production though 52 greenfield mining blocks have been auctioned since the mining laws were amended five years ago.

“Despite having huge mineral potential, our country has not been able to attract investment in the mineral sector unlike the mineral rich countries. India has not only missed out on FDI, but also associated modern technologies for exploration which has constrained us to only produce easy-to-find bulk minerals, which are often superficial in nature,” FIMI’s Duggal said.

Praising the government’s recent proposal to acquire land on behalf of the coal industry to boost production, he said that the government should extend a similar mining proposal for all other  minerals.   

Biman Mukherji is a columnist and consulting editor at Indoasiancommodities.com. He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at biman.mukherji@indoasiancommodities.in

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